ATLANTA
— The deadly fire at a group home for the elderly and mentally disabled in an Ozarks town Monday may hold lessons for a country that is closing many of its state institutions in favor of private community-based facilities.

Nine clients as well as one staff member perished Monday at the Anderson Guest House in Anderson, Mo., which housed 32 residents and two overnight staff. Early worries of arson faded Tuesday. But for Missourians horrified by the blaze, questions linger.

A main concern is why the state didn't require the group home to be equipped with a sprinkler system, especially since people there have difficulty moving around.

That, mental health professionals say, points to problems in both state funding and regulatory oversight, which vary from state to state. But a common problem across the country is that group homes are taking in more difficult clients with needs and requirements that many smaller facilities are not equipped to handle.

"The level of disability is more significant in these congregate community settings than people had anticipated, and we have to examine that across the country in how prepared we are for these people to come to group homes," says Dave Richard, executive director of The Arc of North Carolina, an advocacy group for people with mental disabilities in Raleigh.

For three decades, the US has been in the midst of a seismic movement in how the state cares for the mentally ill. Helped along by movies such as "One Flew Over the Cuckoo's Nest," that depicted abuses possible in isolated state wards, the 411,215 mentally disabled Americans and tens of thousands more classified as mentally ill have trickled out of institutions and into community-based facilities, many of them group homes in residential areas.

Nationally, the number of mentally disabled people in large institutions has dropped from 22 percent to 16 percent over the past five years.

Echoes of a 1999 US Supreme Court decision resounds through the debate. Justices ruled in Olmstead v. L.C. that states must move patients into the least restrictive housing possible for their condition, which has significantly hastened the flow of patients from large institutions into smaller ones, and, ultimately, into their own apartments.

Ethically, it's the right thing, experts agree. But some states had concerns that deinstitutionalization would lead to problems. That has borne true in some respects, including problems with quality of care, safety and availability of services, and trained staff in some smaller care homes.

"States may be reluctant to get on board with [deinstitutionalization] because there are concerns that there aren't enough supports to help [clients] be in the community," says Jessica Jonikas, a director at the Center on Mental Health Services and Research Policy in Chicago.

Another factor, says Mr. Richard, is that many higher-functioning patients, per Olmstead, have been moved into independent-living situations, leaving the most difficult patients now transferring out of state hospitals. Depending on how their conditions are classified, many rely solely on state aid except for a small Social Security supplement. Societal costs plunge from $130,000 for institutional settings to $60,000 for community settings, according to amicus briefs filed in the Olmstead case.

"We believe that people should live in the community, but the ethical question is how you balance the risk of events like what happened in Missouri against the risks of places where people live in [state institutional] settings," says Richard. "It's really the funding that isn't designed to support people with more significant disabilities."

That means that regulators tend not to be tough on private operators doing, for the most part, admirable and necessary work. For example, the Anderson Guest House was permitted to operate without putting in a sprinkler system since it was built before 1980, the year a system was required by state law. It was determined to be too expensive to retrofit the building.

"There's always tension between holding to the letter of the regulations versus allowing these places to operate, because there isn't much else out there" in the way of options for troubled clients, says Judith Gran, an attorney with the Public Interest Law Center in Philadelphia.

To be sure, 22 percent of the mentally disabled population in Missouri have been shifted from institutions into 1,100 community facilities around the state since 2000, according to the Research and Training Center on Community Living in Minneapolis.

It's not clear yet how, or if, difficulties adjusting to that shift played into the tragic events that unfolded as a quick moving fire shot 30-foot flames from doors and windows in Anderson. The state is promising a serious and thorough review of its funding and licensing procedures.

"It's safe to say that legislators, when they return to Jefferson City, will be looking at regulations regarding this horrific incident," says Brian Hauswirth, a spokesman for Missouri Gov. Matt Blunt.